Executive Summary / Key Takeaways

• Strategic Outperformance Amidst Headwinds: Newmark Group (NMRK) continues to demonstrate robust financial and operational growth, significantly outpacing industry averages in key segments like Capital Markets and Leasing, driven by its "superpower" of attracting top talent and a diversified, integrated service platform.
• Technology as an Enabler: While not featuring a single "differentiated technology" in the traditional sense, Newmark leverages a sophisticated commercial real estate technology platform and invests in AI to enhance efficiency, data analytics, and client solutions, underpinning its competitive edge in service delivery.
• Recurring Revenue Expansion: The company is strategically focused on expanding its higher-margin Management Services and Servicing Fees, targeting a doubling to over $2 billion within five years, providing a more resilient revenue stream amidst transactional volatility.
• Strong Outlook and Capital Allocation: Newmark has raised its full-year 2025 guidance, projecting double-digit revenue and earnings growth, and remains confident in its 2026 Adjusted EBITDA and EPS targets, supported by a healthy balance sheet, active share repurchases, and a pivot towards strategic bolt-on M&A.
• Navigating Market Dynamics: Despite macroeconomic uncertainties, fluctuating interest rates, and a competitive landscape, Newmark's deep client relationships, market share gains in high-growth sectors like data centers, and global expansion position it for continued long-term success.

The Foundation of Growth: Talent, Technology, and Market Leadership

Newmark Group, Inc. (NMRK) stands as a formidable commercial real estate advisor and service provider, tracing its roots back to 1929. The company has evolved into a global force, offering an integrated suite of services spanning capital markets, leasing, valuation, property management, and occupier solutions across nearly 100 countries. Newmark's overarching strategy centers on attracting and retaining top-tier talent, leveraging a sophisticated technology platform, and strategically diversifying its service lines and geographic footprint to capture market share and drive organic growth.

The commercial real estate (CRE) industry, a cyclical beast, is currently navigating a complex macroeconomic environment characterized by fluctuating interest rates, persistent inflation, and geopolitical uncertainties. Despite these headwinds, Newmark has consistently demonstrated an ability to outpace the broader market, a testament to its foundational strengths and strategic execution. The company's "superpower," as articulated by management, lies in its ability to attract "prolific and experienced revenue-generating employees" globally, creating a platform of choice for industry leaders. This talent-first approach is complemented by a deliberate focus on expanding into new markets and emerging property types, such as data centers, which are experiencing significant tailwinds from the artificial intelligence (AI) boom.

Newmark's competitive positioning is robust, though it operates alongside larger, established players like CBRE Group (CBRE), Jones Lang LaSalle (JLL), Cushman & Wakefield (CWK), and Colliers International (CIGI). While these competitors boast immense scale and broad global networks, Newmark differentiates itself through specialized expertise, tailored client relationships, and a nimble approach to market opportunities. For instance, Newmark has rapidly gained market share in Capital Markets, with its U.S. Total Debt volumes growing sixfold since 2015 to 9.4% of total U.S. commercial and multifamily mortgage originations over the twelve months ended June 30, 2025. This compares to CBRE's 2024 operating profit margin of 0.04% and JLL's 0.04%, indicating a competitive, albeit qualitatively different, operational efficiency.

A critical component of Newmark's strategy, though not a single "differentiated technology" in the traditional sense, is its continuous investment in a leading commercial real estate technology platform and capabilities. This includes advanced data analytics tools and the integration of AI to drive efficiencies across its operations. These technological enhancements provide tangible benefits by improving the speed and accuracy of transaction processes, enhancing client solutions, and enabling more efficient service delivery. For instance, in its Valuation and Advisory (VA) business, technology likely supports more precise property valuations and market analysis, contributing to the 30% growth seen in this segment in Q2 2025. Similarly, in property and facilities management, technology streamlines operations, leading to more efficient service delivery and potentially higher client satisfaction. The strategic intent behind these investments is to bolster Newmark's competitive moat by offering superior, data-driven insights and operational excellence, thereby attracting and retaining clients in a highly competitive industry. This focus on technological enablement, rather than a singular proprietary product, allows Newmark to compete effectively against rivals who also invest heavily in proptech, such as JLL's emphasis on data analytics and ESG integration.

The company's history underscores this strategic evolution. Following its spin-off from BGC Partners (BGCP) in 2018, Newmark embarked on an aggressive expansion, acquiring companies like Berkeley Point Financial (2017) for multifamily capital markets, Knotel (2021) for flexible workspaces, and Gerald Eve (2023) to bolster its UK presence. This journey has culminated in a diversified, integrated platform designed to meet the full needs of its clients, from large institutional investors to global corporations.

Financial Performance and Operational Momentum

Newmark's recent financial performance highlights its operational effectiveness and strategic momentum. For the three months ended June 30, 2025, the company reported total revenues of $759.1 million, marking a significant 19.9% increase year-over-year. Adjusted EPS surged by 40.9% to $0.31, while Adjusted EBITDA grew 32.1% to $114 million, with the Adjusted EBITDA margin improving by 139 basis points to 15%. Year-to-date (six months ended June 30, 2025), total revenues reached $1.42 billion, up 20.7% from the prior year.

Breaking down performance by segment reveals the drivers of this growth:

• Management Services, Servicing Fees and Other: This segment saw revenues increase by 13.6% to $298.4 million in Q2 2025, and 12.0% to $582.3 million year-to-date. This growth was primarily fueled by a robust 30% expansion in Valuation and Advisory services and continued strength in the high-margin Servicing and Asset Management platform. Newmark's loan servicing and asset management portfolio stood at $182 billion as of June 30, 2025, providing a stable, recurring income stream. The company aims to double these recurring revenue service lines to over $2 billion within five years, a strategic move to enhance overall profitability and resilience.
• Leasing and Other Commissions: Revenues in this segment grew by 13.8% to $237.3 million in Q2 2025, and 21.2% to $445.3 million year-to-date. This was driven by strong double-digit growth in retail and a notable improvement in office activity, particularly in key gateway markets like New York City and the San Francisco Bay Area. Management notes that U.K. office leasing activity in Q2 2025 was the strongest since Q3 2019, indicating a broader recovery.
• Capital Markets: This segment delivered exceptional growth, with revenues increasing by 37.9% to $223.5 million in Q2 2025, and 35.6% to $397.0 million year-to-date. This outperformance was largely due to a 135% improvement in total debt volumes and a 26% increase in investment sales volumes, significantly outpacing industry averages (U.S. commercial and multifamily originations up 38%, U.S. industry investment sales up 11%). Newmark's strength in data centers, office, and multifamily transactions was a key contributor. The company was recognized as the #1 office broker in the U.S. and #3 globally across all property types for the first half of 2025.

Operating expenses saw a 20.5% increase in compensation and employee benefits in Q2 2025, reflecting higher commission-based revenues and investments in growth initiatives. Equity-based compensation also surged by 136% due to the timing of exchangeability grants and contract renewals. Despite these increases, the company's operating leverage is evident in its improved EBITDA margin.

Liquidity, Capital Allocation, and Outlook

Newmark maintains a healthy financial position, with primary liquidity sources including $195.8 million in cash and cash equivalents as of June 30, 2025, and $325 million available under its $600 million revolving Credit Facility. The company's corporate debt includes $600 million in 7.50% Senior Notes and $275 million outstanding under the Credit Facility.

Newmark's adjusted free cash flow, a newly introduced metric, was $228 million for the twelve months ended June 2025, representing a 121.4% improvement year-over-year and a 65% conversion rate from post-tax adjusted earnings, even after significant investments in talent.

Capital allocation remains a key strategic lever. Newmark repurchased 10.8 million shares for $125.5 million in Q2 2025, underscoring management's belief that the stock is undervalued relative to its adjusted free cash flow yield of approximately 6%. Share repurchases and unit redemptions are expected to remain a long-term priority. Looking ahead, management anticipates pivoting towards bolt-on M&A in the second half of 2025, particularly in management services, to further enhance its platform and recurring revenue streams.

Newmark has raised its full-year 2025 outlook, projecting total revenues between $3.05 billion and $3.25 billion (a 15% increase at the midpoint), adjusted EPS between $1.47 and $1.57 (up 20% to 28%), and adjusted EBITDA between $523 million and $573 million (up 17% to 29%). This guidance is underpinned by expectations of high-single-digit to low-double-digit growth in management and leasing businesses, and mid-to-high-teens growth in Capital Markets for the second half of 2025. The company also reiterated its 2026 goals of at least $630 million in Adjusted EBITDA and $1.75 in Adjusted EPS, signaling confidence in continued margin expansion.

Risks and Competitive Dynamics

While Newmark's outlook is strong, investors must consider the inherent risks. Macroeconomic and geopolitical uncertainties, including fluctuating interest rates and inflation, could impact transaction volumes. The CRE market is undergoing repositioning, with decreased demand for urban office space potentially affecting service demand, though Newmark is actively involved in repurposing underutilized assets. Credit risk associated with Fannie Mae DUS and Freddie Mac TAH loans, where Newmark shares a maximum contingent liability of approximately 33% on $33.5 billion in outstanding principal balances, remains a factor. The ongoing "overweight" of CRE books at banks, as noted by CEO Barry Gosin, suggests a gradual shift of debt to private capital over the next five years, which Newmark is well-positioned to capitalize on given its strong debt placement capabilities.

The competitive landscape is intense. While Newmark has demonstrated superior growth rates in Capital Markets compared to industry averages and rivals like CBRE and JLL, its overall scale is smaller. This can lead to higher customer acquisition costs and potentially lower margins in certain segments. However, Newmark's strategic focus on talent acquisition and its integrated service model, particularly its growing international footprint in Europe and Asia, provide a strong counter-narrative. The company's ability to attract top talent, even in competitive environments, is a significant competitive advantage, as highlighted by its rapid expansion in Germany.

Conclusion

Newmark Group's investment thesis is compelling, grounded in its proven ability to generate organic growth by attracting leading talent, strategically expanding its global footprint, and diversifying its revenue streams towards higher-margin, recurring services. The company's strong Q2 2025 results and upwardly revised full-year guidance underscore its operational momentum and effective navigation of a dynamic CRE market. While macroeconomic headwinds and intense competition persist, Newmark's focus on innovative solutions, including its technology platform and AI investments, coupled with its deep client relationships and significant market share gains in high-growth sectors like data centers, positions it for continued outperformance. Investors should recognize Newmark as a resilient and strategically agile player poised for sustained earnings growth, driven by its talent-centric model and a clear roadmap for expanding its integrated service offerings.